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Israeli PM Netanyahu narrowly re-elected

ELEANOR HALL: To Israel now, where prime minister Benjamin Netanyahu this morning claimed a narrow victory in the country's parliamentary election after shrugging off surprise losses to the centre-left and far-right.

Exit polls showed Mr Netanyahu's Likud Party won 31 seats, down from 42 in the outgoing coalition.

He says Mr Netanyahu will have been stunned by today's results and that there is no guarantee that the Likud leader will end up leading a stable coalition government.

He spoke to me earlier from Jerusalem.

ELEANOR HALL: Ehud Yaari, it looks like Mr Netanyahu will again be looking to form a coalition. Do you think there's any doubt he will be looking to the Jewish nationalist and religious parties or could this late surge to Labor make a change there?

EHUD YAARI: Oh no. I think Mr Netanyahu has suffered a major setback and he will have, he's simply forced by the numbers to go for a centre-left coalition.

What we saw tonight is that the Israelis voted for new leaders, voting almost exclusively on a domestic agenda and Mr Netanyahu paid a huge price. He lost about 25 per cent of his strength. He will have to go and seek partners in the centre and slightly to the left.

ELEANOR HALL: You say that Mr Netanyahu will be forced to look to the centre-left parties to form a coalition, but while support for Likud may have dropped there was still a surge to parties like Jewish Home.

EHUD YAARI: I think that the major surge went to the parties in the centre, not Jewish Home which is a sort of modern religious nationalist party. Mr Netanyahu cannot form a right-wing Orthodox coalition as some people have expected.

ELEANOR HALL: So the question is whether Labor will agree to form a coalition. What does he need to do to convince them?

EHUD YAARI: The Labor leader, she has promised the voters that she will not join a Netanyahu-led coalition. I think all these promises and commitments are now up in the air and we may very well have a broad coalition and I believe it will take some time before we have an answer on that.

ELEANOR HALL: Do you think it's certain that Mr Netanyahu will be able to form a coalition or could we see an election even sooner than many expect?

EHUD YAARI: Very good question. At this point I think that it's likely that Mr Netanyahu will be able to reach an agreement but it's not in the pocket. And we have to remember that it's up to the president of the state of Israel, Mr Shimon Peres, who's not a great friend of Mr Netanyahu, to decide who's going to be nominated, tasked with forming a new government.

The possibility of early elections or a government which doesn't last more than a year or two is absolutely there.

ELEANOR HALL: It's interesting because Mr Netanyahu called this election early and was expected to win with an increased majority. There was the biggest turnout here in more than a decade. How do you read that?

EHUD YAARI: It's absolutely stunning because it was like a footy game in which Mr Netanyahu was kicking the ball and there was no opponent. And somehow he managed to miss. Nobody doubted in Israel that he was going to be the next prime minister. The opposition was fragmented totally, both centre and left. And still he managed to, in a way to lose the elections.

And the reason is the Israelis were saying to Mr Netanyahu we want new politics, new leaders, we want to deal with the domestic agenda. And I think he was stunned by the result.

ELEANOR HALL: The domestic issues did feature more than foreign questions but how could a coalition, particularly if it is a broad one, including extreme nationalist groups like the Jewish Home, affect the government's policies on the Palestinian question?

EHUD YAARI: The truth is that we have a solid majority in Israel, I would say up to 70, 80 per cent of the electorate, who support the concept of a two-state solution. However they are disappointed with the prospect of having a serious Palestinian partner. And this is why the Palestinian issue did not play prominently in this election campaign.

The Jewish Home party, although it's calling for a move to incorporate into Israel something like 50 per cent of the West Bank, are not the party that is going to call the shots.

ELEANOR HALL: Ehud Yaari, thanks very much for joining us.

EHUD YAARI: You're most welcome.

ELEANOR HALL: That's Ehud Yaari speaking to me from Jerusalem. And you can listen to a longer interview with him on our website.